The Department of Finance has said it’s confident no rules have been broken – but won’t rule out a legal challenge if findings are negative.

THE EUROPEAN COMMISSION has launched an official probe into whether Ireland broke rules on state aid as part of a tax deal offered to Apple.

Announcing the enquiry, the European Commission said that it has concerns that Ireland may have applied tax law to Apple in a way that allows it to reduce its payment “below the level it should pay based on a correct application of the tax rules.”

The company may have gained a “selective advantage”, the EC said.

The investigation will focus on transfer pricing, which is the price charged for transactions between different parts of the same company.

EC competition chief Joaquin Almunia said:

In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes.

It is thought that the initial investigation could take up to two years, with further legal challenges to an adverse finding dragging it out to a timeframe of four or five years.

Department ‘confident’

In a statement this morning, the Department of Finance noted the decision by the EC, and said that it is confident it hasn’t broken EU rules.

“Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”

There has been significant attention on how Ireland taxes multinational companies operating in the jurisdiction, with particular focus Apple as both the G7 and other supranational bodies seek to clamp down on corporate tax avoidance.

The Department didn’t rule out a legal challenge if there is an adverse finding against Ireland at the end of the investigatoin.

The issue being investigated is not Ireland’s corporate tax rate in general, it said, but rather the individual deal that was struck with Apple.

The statement explicitly denies a sweetheart deal for the US computing giant, saying:

“The company in question did not receive selective treatment and there was no ‘special tax rate deal’. Indeed, the company has publicly clarified that there was no special deal.”

In addition to investigating Ireland’s involvement with Apple, Brussels is going to run the rule over how The Netherlands taxed Starbucks and a deal between Luxembourg and car manufacturer Fiat.

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